The Office of the Comptroller of the Currency has announced a new initiative to keep pace with innovation in the financial. On August 7, 2015, in remarks before the Federal Home Loan Bank of Chicago, the Comptroller of the Currency, Thomas J. Curry discussed the OCC’s efforts to develop a framework to evaluate new and innovative financial products and services. Specifically, Curry mentioned putting together a team with representatives from across the agency – policy experts, examiners, lawyers, and others – to keep pace with FinTech products. He noted that it is still early in the process, but may ultimately result in a small office dedicated to innovation.
Curry noted that seeming conflict between traditional banks and FinTech, citing two recent Economist magazine articles:
In one article, Marc Andreessen, the well-known tech investor, cited the example of a loan officer talking across the desk to a prospective client and said that “to software people, that looks like voodoo.” On the other hand, a second article noted that the data mining methods fintech companies use to evaluate borrowers might look like “sorcery” to traditional bankers.
It’s hard to see how that gap ever gets bridged. For my part, I do see considerable merit in the traditional bank model, where bankers who know the businesses and families they serve are willing to lend money and stand by borrowers in good times and bad because they know the character of those customers. That’s an important piece of the American economic fabric. However, it’s not the only approach to financial services, and it’s important that regulators view new ideas with an open mind and not dismiss them as either sorcery or voodoo.
These remarks demonstrate increased regulatory focus on FinTech: the first step for the OCC and other seems to be to try to understand what FinTech is up to before deciding whether FinTech innovations and business models are good for consumers and the financial system, and whether and how they should be regulated.